Retail Market Strategy

An effective strategy enables the retailer not only to stay in the market but also to grow and prosper.

Any Strategy formulated is done by assessing two factors:

◦ External environment affecting

◦ Capitalization of these opportunities with that of their strengths and weaknesses.

Still no strategy works until they are checked time to time.

Retail Market Strategy Is a statement that defines the direction of

the firms in terms of

◦ The target market which it wishes to cater ◦ Retail format that it proposes to build◦ Retail Mix variables that it chooses to gain◦ Nature of the merchandise◦ Assortment◦ Services offered◦ Objectives of Promotional campaigns◦ Visual Merchandising ◦ Location◦ Number of stores

Target Market and A Retail Format Earlier market - a place where buyers and

sellers met to bargain exchange

In modern market concept - meeting eliminated. Place orders and make payments online

Thus retail market tries to patronage their activities ◦to cater particular group of people having similar

needs

Targeting them and purely serving them

Conti..

A retail format is thus chosen on the basis of target group.

Thus each of the format is with a purpose to fulfill its pre-specified targets

A retailer can even go for different targets ◦ Example: Pantaloons & Factory outlet

Building sustainable Competitive Advantage

Doing something unique to make it differentiable from its competitor

This could be attained by getting edge on influential dimensions like◦Price◦Location◦Merchandise◦Service◦Communication

That could be possible only when retailer is internally strong enough with better stores functions like◦Procurement ◦Logistics◦Operations◦Finance◦Technology◦Regular Market Research.

Wal-Mart’s Competitive Strategy

Wal-Mart derives it Competitive advantage from its influential & stores dimensions like

◦Geographic dimensions

◦ Inventory selection strategy

◦Flexible pricing

◦Operations Strategy

◦Hub & spoke distribution network

◦Better vendor relations

◦ Its organizational culture

Wal-Mart’s Choice of geographic location

In rural areas and small towns where there were no international retails like them

Wal-Mart took the first mover advantage

As a sole discount retailer it could easily attract customers and till date retains them.

Wal-Mart’s Inventory selection strategy. The company did not follow any common

corporate policy on merchandising

Instead it gives local stores manager s the autonomy to choose products and allocate shelf space

Because they are the one who are familiar with customer preference and local needs

Wal-Mart’s flexi-pricing policy

Again the pricing of the products is left to the stores manager

Prices are thus set according to local demand and the number of competitors

◦ Demand and price directly related◦ Competitors and price inversely related

Conti.. This local control

◦ maximizes its sales turnover ◦ while minimizing expenses (as don’t even need to

augment its customers more)

This type of pricing gives Wal-Mart flexibility ◦ To price competitively in the areas with close

competitors

◦ And price reasonably in areas where it is the only retailer operating

Wal-Mart’s Operational Strategy Its operational strategy enables it to

achieve maximum efficiency at lower costs.

Because of Multiple distribution centre the inventory occupied only 10 % of the store space

whereas for its competitors it is 25 % of the space.

Thus could make use of the increased store space for displaying more goods

Conti.. Instead of individual product labeling

Wal-Mart practices Shelf-labeling which minimizes handling and thereby reduces cost

Investments in technology like electronic scanning devices and satellite systems for collection of sales data enabled them for better inventory management

Through which they could to avoid deep discounting due to overstocking of goods

Wal-Mart’s Hub & Spoke (Chariot wheel) distribution network Has a highly sophisticated distribution network

The merchandise reaching at distribution centers is sorted within 1-2 days and made ready for delivery to the stores

This merchandize is delivered through cross-docking is a practice in logistics of unloading materials from an incoming semi-trailer truck or rail car and loading these materials in outbound trailers or rail cars, with little or no storage in between

Thus minimizing inventory storing cost and allowing Just-in-time delivery

Conti.. Company ships 80 % of its merchandize

from its own distribution centers so as to have control over inventory and to avoid dependence on its vendors

Wal-Mart’s Vendor Relations Company reduced the bargaining power of

its supplier buy not purchasing more than 2.4 % of its requirements from a single supplier

It further gained a cost saving by keeping a manufacturers representatives

It even started communicating to its 3600 vendors regarding the ◦ purchase orders, forecasting, planning all through

electronic data interchange

Conti.. Wal-Mart was even successful in

transferring its key vendors like P&G in to partners and began sharing its static plans with them.

They in turn appointed teams specifically to manage products for Wal-Mart.

Merchandise strategy

Store’s Brands in India

Indian retail market is witnessing striking presence of store brands in recent times

FoodWorld( RPG & Dairy farm international) having their own brands in more than 15 categories like rice, sugar, jam, socks floor cleaner etc.

Shoppers stop’s Private labels like stop, kashish, life and karrot spread across different categories of product--- resulting to 20 % of its turnover

Ebony realizes 2 % of its sales from its own brand EbonyETC.

Store brands benefits retailers with

◦Better margins

◦Greater bargaining power

◦And ability to offer greater value at lower prices

◦It even enables them to reduce value gaps (as for customers store brands means reasonable quality at lower prices)

Each retailer has its own reasons for storing store brands

Some store it only in those categories where no much of the national brands exist

◦ Say for Subhiksha stored its own brands in basmati rice and atta

Developing own brands do require considerable investments in◦ Designing resources◦ Hiring the buying and merchandizing◦ Sampling activities◦ Brand development( take the entire cost of promotion)

Conti.. There is large debate prevailing that

retailers are promoting their store brands at the expense of other national brands they keep

But still there are huge upcoming in this area◦FoodWorld planning to extend store brands to

30 more categories in the next year

When we talk of merchandising

◦ Retailers like Wal-Mart thinks of going for the strategy of Large varieties of product with shallow assortments

◦ Some prefer to go for Shallow varieties with deep assortment

◦ Retailers need to make a choice between 2 strategy

◦ As keeping both of the above may create handling difficult, leading them to uncompetitive

◦ But still we have Retailers like JC Penny & Sears managing to equip their stores with both Wide variety and deeper assortments

Location Strategy Many customers and Retailers have realized

the benefits of healthy competition

Healthy competition encourages them to perform better and even provides customer a better bargaining power

Like Iscon Mega Mall having Westside, koutons, Arrow, Petter

Englang, wills lifestyle, Van heusens, Lee, Levis, Pepe, Lee cooper.

Conti… With so many players aspiring for a small market

share each would eat in to others sales volume.

Very few have the drawing power that would make customers travel a mile only 2 visit them

Like Bikaner Sweets, Rasranjan, all Auto-dealers.

Unless retailer has a high drawing power it is the location of the area that drives customers towards it.

If going for a peek location ◦ retailers can go for keeping complementary product

range where in customer can feel it to be a complete shopping space.

Service Offering Strategy No retailer can afford providing all the services

expected by customers

Neither it would be feasible for them thus need to carefully choose the service they would like to offer.

Should not go for services of high costs to a low priced merchandise (keep them happy both price and service wise)

Neither should not opt low services to a high priced merchandise.

Choosing Services Retailers can broadly classify the services in

to three categories

Service that Provide Convenience

Service that facilitate sales

Auxiliary services

Service that Provide Convenience

Convenient shopping hour

Proper layout

Friendly personnel

Parking facility

Convenient location

With Advent technology Electronic Shopping carts. (displays special offers/discounts when a customer passes to the merchandise row).

Service that facilitate sales

We can find certain services offered only if a minimum amount of purchase is made

Credit facilities, free delivery and installation do facilitate sales of a retailer

In high cost luxury merchandise if free delivery not offered then customer do hesitate to buy

Offering Installment payment facilities

Credit card acceptance has also promoted purchase of more product

Auxiliary services Services like

Baby sittinggift wrappingGaming ZoneArt GalleryCheque acceptance of few bank( that helps

them to scan it to avoid risk)

Thus selection of services to be offered free of cost and

that too be offered at a minimal cost should be according to the type of customer

Some people shop for leisureSome shop when needed.

Retail Strategy Planning Process

Select Markets to compete in

Identify Strategic Alternatives

Establish Objectives

Conduct situational analysis

Develop Positioning strategy

Evaluate results

Obtaining Resource needed to compete

Implement strategy

Develop a mission

Mission

Reflects the basic purpose of existence

MC Donald’s mission statement “ Quality , service, convenience and value”

It emphasis on delivering value to its customers by providing quality services and convinience

Objectives What firm seek to achieve

In terms of ProfitSales volumeMarket shareQuality levels etc

Prime a force talks about Pricing Merchandizing & Location

Situational Analysis

In SWOT, strengths and weaknesses are internal factors.

strength could be:◦ Your specialist marketing expertise. ◦ A new, innovative product or service. ◦ Location of your business. ◦ Quality processes and procedures. ◦ Any other aspect of your business that adds value

to your product or service.

A weakness could be:◦ Lack of marketing expertise. ◦ Undifferentiated products or services (i.e. in

relation to your competitors). ◦ Location of your business. ◦ Poor quality goods or services. ◦ Damaged reputation.

In SWOT, opportunities and threats are external factors.

An opportunity could be:◦ A developing market such as the Internet era. ◦ Mergers, joint ventures or strategic alliances. ◦ Moving into new market segments that offer

improved profits. ◦ A new international market. ◦ A market vacated by an ineffective competitor.

A threat could be:

◦ A new competitor in your home market. ◦ Price wars with competitors. ◦ A competitor has a new, innovative product or

service. ◦ Competitors have superior access to channels of

distribution. ◦ Taxation is introduced on your product or service.

SWOT of Starbucks (Seattle)

Strength Starbucks Corporation is a very profitable

organization, earning in excess of $600 million

It is a global coffee brand built upon a reputation for fine products and services. It has almost 9000 cafes in almost 40 countries.

Starbucks was one of the Fortune Top 100 Companies to Work For

The company is a respected employer that values its workforce.

The organization has strong ethical values and an ethical mission statement as follows, 'Starbucks is committed to a role of environmental leadership in all facets of our business.'

Weaknesses. Starbucks has a reputation for new product

development and creativity. But this creativity has a limited scope

The organization has a strong presence in USA with more than three quarters of their cafes located in the home market.

But has not looked upon for a portfolio of countries, in order to spread business risk.

The company has only concentrated on retailing of coffee and has not diversified this will limit their further growth.

Opportunities. Starbucks are very good at taking advantage of

opportunties.

In 2004 the company created a CD-burning service in their Santa Monica (California USA) cafe with Hewlett Packard, where customers create their own music CD.

New products and services that can be retailed in their cafes

Has the opportunity to expand its global operations. New markets for coffee such as India

Have great potential of Co-branding with other manufacturers of food and drink, and also can opt for franchising

Threats. Who knows if the market for coffee will grow and

stay in favour with customers,

Or whether another type of beverage or leisure activity will replace coffee in the future?

Starbucks are exposed to rises in the cost of coffee and dairy products.

Its success has brought in entry of many competitors like. MC-D, Dunkin ’Dunuts, P&G (selling pre-packaged coffee to Target & Costco

SWOT for Wal-Mart

Strengths.

Wal-Mart is a powerful retail brand.

It has a reputation for value for money

Convenience and a wide range of products all in one store.

Wal-Mart has good capability of global expansion through joint ventures with big giants

◦ (purchase of the United Kingdom based retailer ASDA,

◦ collaboration with Bharti).

Conti.. Has Core competence due to its use of IT to support

its international logistics system.

For example, it can see how individual products are performing country-wide, store-by-store at a glance. IT also supports Wal-Mart's efficient procurement.

A focused strategy for human resource management and development.

invests time and money in training people, and retaining a developing them.

Weaknesses.

Wal-Mart is the World's largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.

Since Wal-Mart sell products across many sectors (such as clothing, food, or stationary), it may not be able to focus each competitor.

Opportunities.

Global retailers always ready to merge.

Still has currently only trade in a relatively small number of countries. Therefore tremendous opportunities for future business in expanding consumer markets

New locations and store types offer Wal-Mart opportunities to exploit market development.

They diversified from large super centres, to local and mall-based sites.

Highly flexible organization

Threats. Being number one they are the target of

competition, locally and globally.

Being a global retailer exposed to political problems in the countries that they operate in.

Intense price competition is again a threat. As other also strated adopting the strategy so need to even pioneer in some other strategy too.